irondoor91

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    • Tue Sep 9th 11:28 AM | Rating: 0 0
      Commented on:
      Palin, On the Ongoing Financial Crisis
      So, the folks in Washington are the brains of the country and anyone who cuts spending and returns money to its righful owner (in this case the taxpayer) is a rube. How are the books of the US government (now including the Fan/Fred guarantees) going to be balanced?

      McCanin/Palin should offer a simple solution at the town hall meetings: "Folks, what would you do if your expenses were more than your income?" The same thing Fan/Fred are telling homebuyers to do; cut your expenses and save up for a down payment.

      Why not just state that every government department (including all those off-balance sheet items) is going to freeze hiring and spending at the same level of inflation used to calculate Social Security payments. Ultimately, we might get the budget under control. At least the citizens of this count ry could understand the logic of it. If not, we don't stand much of a chance except with a revolution.
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    • Tue Sep 9th 10:01 AM | Rating: 0 0
      Commented on:
      Bill Gross: Brilliant, As Usual
      Name one bailout that worked during a bear market. This one won't either and we are going much, much lower. Not one thing has been done to put money into the pocket of the mortgage payer. Oh, the buyer may get a lower interest rate (if he qualifies), but where is he going to get the 20% down payment? The days of interest-only, negative amortization, zero down, stated income, etc are over.

      It is only when prices are in the range of 3x income that the housing market will stabilize, and that's for those folks at the lower end of the spectrum. Even when those 5,000 sq ft monsters come down to under $500,000, how's the new buyer going to afford the insurance, taxes, utilities, maintenance, etc that is now going to have to be in his budget?

      No, the only way the "excess" inventory is going to be worked off is to buy it up and burn it.

      In the meanwhile, Treasury could just have all existing homes with a mortgage re-appraised and issue new loans based on that appraisal. That way, nobody is under water. If the equity can go away, why not the overhanging debt. This might work for the stock market also, as I notice that margin debt is at an alltime high.
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    • Sun Sep 7th 16:20 PM | Rating: 0 0
      Commented on:
      Bear Market In Its Final Stages?
      The stock market is the perfect reflection of the people's mood. When that changes, it will begin to show up in the averages. Check out mutual fund cash politions, dividend yield, a/d line, etc. The banks are loaded with under-performing real estate that is about to get even worse. We are just beginning to enter the worst phases of the economic downturn. The reasons for individuals and businesses accumulation of cash is obvious: They are going to need it.
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    • Sun Sep 7th 16:11 PM | Rating: 0 0
      Commented on:
      What Will Fannie / Freddie Mean for Monday?
      Hey lanaslinesdotcom,

      Buy stocks that are "positioning themselves". Can you give us the names of a few of these gems? Is there a fund manager alive who hasn't been trying to find these gems forever? I direct you to the mutual fund statistics for the past 8-10 years. Seems to me that Cash has been the best asset to hold over that time and zero risk. But I guess that there are many out there who just can't get over the "buy and hold" mantra that Wall Street has been selling for 30 years. Its over.
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    • Sat Sep 6th 13:12 PM | Rating: 0 0
      Commented on:
      RNC / DNC: Crisis? What Crisis?
      Has anyone researched the promises made vs. promises kept for each political party over the past, say, 40 years? I'm speaking of both Presidential and Congressional candidates and their leadership. It is obvious that they cannot put forward a sensible, workable program that has any utility in the long run. Why? Because they are crisis reactors rather than studious, common sense operators. Their only salvation is to stay in office, blame the other party and take voters eye off the problems they have created in the past 80 years.

      A case in point is the recent "stimulus" package. Why was the $150 or so billon the right number? Why not $1.5 trillion? That seems to be the number for the debt crisis, doesn't it. If they would just print and distribute the $1.5 Trillion where it was needed, the debt/credit problem would be solved and Americans would be able to own their homes debt-free. That would then free up a lot of cash flow to buy all the new "stuff" that everybody needs and keep factories around the world humming.

      And talk about a vote getter! Just have Congress authorize the Fed Reserve to pay off all debt owed to credit card companies, auto financing, businesses, etc. While they are at it, they can nationalize Fred and Fan and retire all that debt. They could also start paying 20% interest on CD's so retired folks can have a decent standard of living, while at the same time passing a law that says it is illegal for stocks to go down. That would solve the 401-k problems and encourage folks to put money into the stock market.

      See how easy it would be?
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    • Tue Sep 2nd 19:23 PM | Rating: 0 0
      Commented on:
      Small Foundations Get Adventurous
      That's why he's offering himself as a "consultant" to these small foundations. It's called leveraging yourself and he believes he's found a niche that's too small for the major fund of fund operations.
      View article »
    • Tue Sep 2nd 19:13 PM | Rating: 0 0
      Commented on:
      On Being Rich
      Two points: (1) The names of the individuals or families making above or below the $250,000 level will change considerably over time. This is the problem with equating gross income "rich" with wealth "rich". The person with a $2.5 million diversified portfolio producing a 10% annual investment return is much more secure than a NY lawyer or broker 5 years out of school who is skillful enough to have obtained a position with a major law or securities firm. They have been living a relatively good life in NYC up until now.

      They will quickly find themselves out of the "rich" income bracket and on the unemployment line with zero assets.

      Contrast them to the conservative owner of his own closely held business anywhere in America. He has built it up over the past 15-30 years, usually with he and his spouse working 80 hr weeks with no time off. Living in a modest home and driving an 8 year old automobile as he plows everything back into the business. If he has been fortunate enough to survive the government regulation and the generally unenlightened and uneducated "workforce" he must choose from, he will have created a business with some value. Maybe its worth the $2.5 million to his competitor or to a younger entrepreneur.

      One thing is for damn sure. He is not going to take out a $250,000 salary so that the blood-sucking government can tax it at 50%+. There are many, many ways to get value from a company other than taxable salary and this man has spent a lifetime learning how.

      The higher Obama raises the marginal tax rate, the lower the revenues will be.
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    • Sun Aug 31st 10:58 AM | Rating: 0 0
      Commented on:
      Thursday's Stock Rally Means Little to Trends
      Nice work. It is helpful from time to time to be reminded of the "big trends" in these primary market indicators. The daily noise can sometimes be deafening if you are just watching the screen and clicking the mouse. These are the charts that should be reminding "long term" investors that there are times when "buy and hold" means a real loss of money and purchasing power. There are times when "sell and just get out of the way" is the trade to make. There will always be a better time to buy in the future.
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    • Sun Aug 31st 10:30 AM | Rating: 0 0
      Commented on:
      Bracing for Another Round of Credit Related Woes
      "This tells me that we've got serious problems. If a prime borrower can't get funds to secure a bargain-basement real estate deal, then you've got to believe credit is tight. And tight credit is deflationary."

      Right you are. The reason the banks aren't lending on "bargain basement real estate deals" is that they have plenty of them as collateral on their balance sheets already and the prospects of owning more are increasing daily. They need the cash to invest in low-cost Fed funds and they need to get the current crop of loans off the reservation before they deteroriate any more.

      Your real estate friend should hunker down, manage his cash flow , pay down his debt and let the momentary fit of greed pass on by. There will be even greater "bargain basement" opportunitues ahead.

      View article »
    • Thu Aug 28th 18:42 PM | Rating: 0 0
      Commented on:
      Will You Look Back on Today as Your Greatest Missed Opportunity?
      Are stocks riskier than bonds? There was a time in the long-distant past that investors thought so and that demanded to be compensated for it by pricing stocks at a yield greater than the bond yield. As recently as a year ago, stock dividend yields on the S&P were at the lowest in history. Stock mutual funds had one of the lowest % holding of cash in history. What happend since then? Stocks down 15% and dividends maybe up slightly. I doubt if mutual fund cash is up any, since the funds are having net outflows. The only thing that has kept S&P dividends somewhat up had been the financials, since they were north of 35% of the S&P weighting. Where are the financals dividends going? Down, that's where. Of course, their yields may stay up reasonably as a group since the stock prices have come way down.

      For value guys, there is nothing more attractive than stock prices going down. My thinking is that you will be even happier and more eager to buy a year down the pike.
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    • Thu Aug 28th 11:08 AM | Rating: 0 0
      Commented on:
      2008: A Great Year for Short-Sellers
      Here's and example of how an investor could use the double inverse ETF's to hedge the stock-only portion of his portfolio. For illustration purposes, let's assume a portfolio of $1 million in either individual stocks or funds. Further, let's assume that the investor holds his stocks in a brokerage account that has margin borrowing available. Depending on the type of stocks held, the investor can determine which double inverse ETF would most closely track his portfolio (DXD for the Dow, SDS for the S&P 500, QID for the Nasdaq 100). He would then purchase, on margin, and amount of the double inverse ETF to equal half the $1 million stock portfolio. For example, assume that he decideds to use the double inverse ETF on the S&P 500 (SDS). Assume that it is priced at $63.29 (yesterday's close). To fully hedge his portfolio, he would purchase $500,000 of the SDS. $500,000 divided by the per share price of 63.29 indicates that he should purchase approximately 7,900 shares of SDS. To visualize how this works to hedge the portfolio, assume that his stocks decline 10% to $900,000. SDS should increase by 20% (double the inverse), to make up the $100,000 loss on the stock portfolio. If his stock selection outperforms the market, he will come out ahead. Conversely, if his stocks underperform the market he will still lose money in spite of his hedge. This analysis does not take into consideration the costs of ownership of the stock portfolio, commissions, interest paid on his margin account and the internal cost of operations inherent inside the ETF. While these inverse ETF's are one of the simpler and easier to use hedging vehicles for retail investors and have proved popular and profitable during the current stock market weakness since last October, they will more than likely disapoint investors who have no disciplined method of timing the swings in the market.
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    • Tue Aug 26th 12:35 PM | Rating: 0 0
      Commented on:
      The Reign of Uncertainty in Financial Markets
      I would like to ask the author to point to the most recent period of "certainty". A period of Certainty, like a period of low volatility is Certain to lead to a subsequent period of Uncertainty and Higher Volatility. That's the way human nature works. It abhors a vacum of Certainty where everyone's assumption is a continuation of the same. That's what Black Swans are made for.
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    • Tue Aug 26th 12:24 PM | Rating: 0 0
      Commented on:
      The Pelosi Factor - Cramer's Mad Money (8/25/08)
      Hmmmm.

      I thought Jim's bottom call on July 15th had "no reservations". Now, it seems that only the Fed and Treasury can save the market. Let me see--- Fan and Fred have somewhere in the range of 5 trillion on their balance sheets. The Fed/Treasury step in. Now that 5 trillion is onthe taxpayers' balance sheet. How did all that action help the homeowner pay his mortgage, insurance and property taxes.

      Also, please explain how the Fan-Fred problem weighs on the "4 horsemen". Or is it now the "2 housemen"?

      Jim, we don't need lower interest rates. We need higher incomes and/or lower house prices. Which do you think we'll see first?
      View article »
    • Tue Aug 26th 12:12 PM | Rating: 0 0
      Commented on:
      Using Historical Averages Can Make Money in Stocks
      When looking at stock market returns, the past 25 years will likely turn out to be an anomaly. Since you make an issue of dividends, surely you must know that the dividend level today of slightly more than 2% is significantly smaller contributor to total return than it has been over the longer-term history of the market. "Way back when", stocks were considered much more risky than bonds and investors demanded compensation for their risk; thus the dividend yield was larger than bond interest yield.

      In the past 30+ years as central banks have devalued their currencies and inflated the "nominal value" of paper assets, investors have become to accept that an ever-larger portion of their long-term return will come from capital appreciation vs. from dividends. In fact, the mantra has been that companies that pay dividends are somehow under-performing and investors have insisted that managements re-invest excess cash flows back into the business or use it for stock buy-backs. In a low interest rate environment, managements have levered up to buy back stock.

      We now see where this has gotten us as it turns out it is all nothing but financial engineering. Our country's economic production strength has been sapped as companies transferred their manufacturing and production overseas, while perhaps keeping headquarters, sales and marketing here. This leveled out the fluctuations in US employment and transferred the risks of manufacturing slowdowns overseas. But, you can't transfer commerical and residential construction overseas, and since the American housing industry is the greatest absorber of liquidity and leverage upon leverage in the world, that's where much of the world's excess liquidity has gone in the past 7 years. Any why not, since American housing has never gone down in value (except in the Great Depression, of course).

      As it all comes home to roost now, you will find reversion to the mean, all right. The stock market has the same problem as the housing market. Housing got to be overpriced and was pumped up with exotic financing, no money down, etc. It deviated to the extreme from its normal price of around 3 x annual family income. Since annual family income is approximately $50,000, the average natural price of single family housing is upwards of $150,000 per unit. It will get there eventually or the housing glut will never be absorbed. Either incomes are going up by 50% immediately or housing is going down immediately. Which do you think it will be?

      The stock market is in the same boat and it will revert to its natural mean. It just isn't going to be in the direction that you propose, however. Either dividends will double while the price of the S&P remains constant or the S&P will have to decline to reprice to the natural yield of around 4%-5%. That should give us a market price of the S&P 500 somewhere in the range of about half of where it is today.

      Another fly in the ointment is your assumption of an 11% annual dividend increase. As we continue into recession if not mini-depression, dividends will be cut (as they already are for the financials) and stocks will have to go even lower to reprice to the natural yield.

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    • Tue Aug 26th 10:08 AM | Rating: 0 0
      Commented on:
      Macro Trends Spell Doom for Banks and Their Profits
      User 251091: If all you say is true, why is the market down 20%?
      View article »
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